A founding member of the Monetary Policy Committee (MPC) has dampened speculation that the Bank of England could start cutting its interest rate soon.

City investors have priced in rate cuts this spring, while some economists have predicted the base rate could drop to 4% during 2024, from its current 5.25%.

While many in the property industry are similarly hopeful of the market receiving a boost from a base rate cut, Dame DeAnne Julius told the Telegraph: “I don’t think the Bank [of England] will be able to because I don’t think inflation will come down much further or much faster. 

“I think we are stuck with a fairly sticky inflation situation.”

Dame DeAnne, who was a member of the first MPC from 1997 to 2001, added: “Wages are just too strong. The labour market is too tight.

“When you get the kind of high wage increases that we have seen, it affects the whole services sector, and that is a much bigger sector than the goods sector in our economy.”

Dame DeAnne believes the Bank of England could even increase the rate to 5.5% this year.

Although the current MPC voted to hold the base rate steady in December, three of the nine-strong committee voted for an increase of 0.25%.

Despite the current freeze on the Bank of England rate, the mortgage market is becoming increasingly competitive.

According to Rightmove’s weekly mortgage tracker, the average five-year fixed mortgage rate is now 4.96% – the first time it has dipped below 5% since June 2023.

Matt Smith, Rightmove’s mortgage expert said: “Rate cuts are gathering pace, as lenders jostle for position at the start of the year.

“This can only be good news for those looking to move home and those whose fixed deal comes to an end soon.”